EX-10.2 4 dex102.txt AMENDED AND RESTATED EMPLOYEE AGREEMENT EXHIBIT 10.2 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement (this "Agreement") by and between Plains Resources Inc., a Delaware corporation ("Company"), and John T. Raymond ("Employee") is entered into as of September 19, 2002, but shall not be effective until the date (the "Effective Date") on which all the shares of the common stock of Plains Exploration & Production Company, a company to be formed by the conversion of Plains Exploration & Production Company, L.P. into a Delaware corporation ("PXP"), held by Company are distributed to Company's stockholders (the "Distribution"); provided, however, that if the Distribution does not take place on or before May 23, 2003, this Agreement shall not become effective and the Agreement between Company and Employee effective as of May 17, 2001 (the "Original Agreement") shall remain in full force and effect. WHEREAS, Company desires to employ Employee in a different capacity and Employee desires to be employed by Company in such capacity; NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties, and agreements contained herein, and for other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. Employment. Contingent on the Distribution occurring no later than May 23, 2003, Company agrees to employ Employee, and Employee hereby agrees to be employed by Company, on the terms and conditions set forth in this Agreement. 2. Term of Employment. Subject to the provisions for earlier termination provided in the Agreement, the term of this Agreement (the "Term") shall commence on the Effective Date and shall terminate on the fifth anniversary of the Effective Date; provided, however, that following the fifth anniversary of the Effective Date, the Term shall automatically be extended one year and again for successive one-year periods on each anniversary thereof, if Employee and Company shall have agreed to new compensation terms at least ninety days prior to the end of the initial five-year period and any additional one-year extensions. Notwithstanding any provision of this Agreement to the contrary, termination of this Agreement shall not alter or impair any rights or benefits of Employee (or Employee's estate or beneficiaries) that have arisen under this Agreement on or prior to such termination. 3. Employee's Duties. During the Term, Employee shall serve as the Chief Executive Officer of Company, with such customary duties and responsibilities as may from time to time be assigned to him by the Board, provided that such duties are at all times consistent with the duties of such positions. Employee shall report directly to the Board. All other employees of Company, other than the Chairman of the Board, shall report to Employee. Employee agrees to serve without additional compensation, if elected or appointed thereto, in one or more offices or a director of any of Company's Subsidiaries. For purposes of this Agreement, a "Subsidiary" shall mean any entity in which Company owns a majority of the voting stock of the class of securities (or other interests in the case of a limited liability company or partnership) that may vote in the election of the members of the governing body of such entity. Employee agrees to use reasonable best efforts to perform faithfully and efficiently his duties and responsibilities hereunder. Company understands and acknowledges that Employee shall be an employee and executive officer of PXP, and therefore, Employee will not be able to devote all of his attention and time during normal business hours to Company. Accordingly, Company agrees that the performance of Employee's duties on behalf of PXP shall not be a breach of this Agreement or the Original Agreement. Notwithstanding the foregoing, during the Term, Employee may engage in the following activities so long as they do not interfere in any material respect with the performance of Employee's duties and responsibilities hereunder: (i) serve on corporate, civic or charitable boards or committees, (ii) deliver lectures, fulfill speaking engagements or teach on a part-time basis at educational institutions but not more than 20 hours per month, and (iii) manage his personal investments; provided, however, that in no event shall the conduct of any such activities by Employee be deemed to materially interfere with Employee's duties hereunder until Employee has been notified in writing thereof by the Board and given a reasonable period in which to cure such interference; and further provided that Employee shall notify and obtain approval of the Board prior to accepting any of the positions described in clause (i) above, which approval shall not be unreasonably withheld. In addition, Employee shall be permitted to manage his personal investments described in clause (iii) above in accordance with the preceding sentence provided that (a) such management shall not interfere in any material respect with the performance of Employee's duties and responsibilities hereunder or violate Company's conflicts policy as in effect from time to time, (b) Employee informs the Board of any conflicts of interest (whether actual or apparent) with Company and any of its Subsidiaries, including any event reasonably likely to raise the appearance of conflicts, and (c) Employee notifies the Board of, and discuss with the Board with respect to, any opportunities presented to Employee or any of the entities in which Employee owns a majority interest in connection with such continued ownership and management that should be offered to Company or its Subsidiaries. Notwithstanding the foregoing, Company agrees that Employee's management of his current personal investments, as disclosed to Company prior to the Effective Date, shall not be deemed to materially interfere with his duties hereunder. 4. Compensation. (a) Base Compensation. For services rendered by Employee under this Agreement Company shall pay to Employee a base salary ("Base Compensation") of $150,000 per annum payable in accordance with Company's customary payroll practice for its senior executive officers. The amount of Base Compensation shall be reviewed periodically by the Board and may be increased from time to time as the Board may deem appropriate. Base Compensation, as in effect at any time, may not be decreased without the prior written consent of Employee. (b) Annual Bonus. In addition to his Base Compensation, Employee shall be eligible to receive each year during the Term, a cash incentive payment in an amount 2 equal to 100% of Employee's Base Compensation (the "Target Bonus"). The amount of the Target Bonus earned for any year shall be determined by the Compensation Committee of the Board based on Employee's individual performance and the performance of Company. (c) Performance Option and Second Options. The terms of the performance option (the "Performance Option") granted to Employee, as adjusted for the Distribution as of the Effective Date, and the stock options covering 200,000 shares of Company common stock granted to Employee in June 2001 and 175,000 shares of Company common stock granted to Employee in February 2002 (collectively, the "Second Options") shall remain in full force and effect in accordance with the terms of the agreements evidencing the Performance Option and the Second Options, as the case may be, except for appropriate adjustments that shall be made due to the Distribution in accordance with the Employee Matters Agreement dated July 3, 2002, between the Company and PXP, as amended (the "Employee Matters Agreement"), including, without limitation, adjusting the exercise prices for the Performance Option and the Second Options and the issuance by PXP of stock appreciation rights (the "PXP SARs") having the same terms and conditions as the Performance Option and the Second Options, as the case may be, with a strike price and a number of PXP SARs calculated in accordance with the Employee Matters Agreement. The agreement representing the Performance Option shall be amended to reflect these adjustments, and PXP and Employee shall execute an agreement reflecting the PXP SARs. Notwithstanding anything contained in this Agreement or otherwise, the parties hereto agree that no actions under this Agreement or related hereto shall be deemed to be a termination of Employee or deemed to result in satisfaction of any of the performance goals related to the Performance Option and the Distribution shall not be a Change in Control. (d) New Grants. On the trading day following the Effective Date, Company will grant Employee 75,000 restricted shares of Company common stock with respect to which restrictions will lapse pro rata over a three-year period beginning on the first anniversary of the Effective Date and under such other terms and conditions as provided in the agreement evidencing such award and an option covering 250,000 shares of Company common stock having an exercise price equal to the closing price of Company common stock on the trading day following the Effective Date, vesting pro rata over five years beginning on the first anniversary of the Effective Date with a ten-year term, and under such other terms and conditions as provided in the agreement evidencing such option. 5. Other Benefits; Business Expenses. (a) Employee shall be entitled to participate in all incentive compensation plans and to receive all fringe benefits and perquisites offered by Company to any of its senior executive officers, including, without limitation, participation in the various health, 3 retirement, life insurance, disability insurance and other employee benefit plans or programs provided to the employees of Company in general, subject to the regular eligibility requirements with respect to each of such benefit plans or programs, and such other benefits or perquisites as may be approved by the Board during the Term, all on a basis at least as favorable to Employee as may be provided to similarly situated senior executive officers of Company. Employee shall be entitled to take appropriate and reasonable annual vacation time provided that such vacation time does not interfere with his duties hereunder. (b) Company shall reimburse Employee for all reasonable business expenses incurred by Employee in the performance of his duties; which expenses will be subject to the oversight of Company's audit committee in the normal course. It is understood that Employee is authorized to incur reasonable business expenses for promoting the business of Company, including reasonable expenditures for travel, lodging, meals and client or business associate entertainment. Request for reimbursement for such expenses must be accompanied by appropriate documentation. 6. Termination. This Agreement may be terminated prior to the end of its Term as set forth below. (a) Resignation. Employee may resign his position at any time. In the event of such resignation, except in the case of resignation for Good Reason (as defined below), Employee shall not be entitled to further compensation pursuant to this Agreement except as may be provided by the terms of any benefit plans of Company in which Employee may be a participant and the terms of any outstanding equity grants, and for salary accrued but unpaid through the date of resignation and reimbursement of expenses incurred prior to such date. (b) Death. If Employee's employment is terminated due to his death, this Agreement shall terminate and Company shall have no obligations to his legal representatives with respect to this Agreement other than the payment of benefits as described in Section 6(c)(i) below, salary accrued but unpaid through the date of termination, reimbursement of expenses incurred prior to such date, and benefits under the terms of any outstanding equity grants. (c) Discharge. (i) Company may terminate this Agreement and Employee's employment for any reason deemed sufficient by Company upon notice as provided in Section 10. However, in the event that Employee's employment is terminated during the Term by Company for any reason other than Cause, in the event of Employee's death or Disability, or if Employee's employment is terminated for Good Reason, then: (A) Company shall pay Employee immediately upon termination of Employee's employment a lump sum equal to $2,500,000; 4 (B) for the 36-month period after the Date of Termination (as defined below), Company shall provide or arrange to provide Employee (and Employee's dependents) with health insurance benefits no less favorable than the health plan benefits provided by Company (or any successor) during such 36-month period to any senior executive officer of Company; provided, further, to the extent the coverage or benefits received are taxable to Employee, Company shall make Employee "whole" on a net after tax basis; and provided, however, that such coverage shall cease if Employee obtains comparable replacement coverage (although Employee shall have no obligation to pursue such coverage); and (C) on the Date of Termination all then outstanding Company stock-based awards of Employee, whether under this Agreement, a Company stock plan or otherwise, shall become immediately exercisable and payable in full, as the case may be, with any performance goals associated therewith being deemed to have been achieved at the maximum levels and all restrictions removed with respect thereto (including without limitation with respect to the Performance Option); and (D) Company shall reimburse Employee for expenses incurred prior to the Date of Termination. (ii) Notwithstanding the foregoing provisions of this Section 6, in the event Employee is terminated because of Cause, Company shall have no obligations pursuant to this Agreement after the Date of Termination other than reimbursement of expenses incurred prior to such date. For purposes herein, "Cause" means (A) the failure by Employee to perform reasonably assigned duties with Company, (B) the engaging by Employee in conduct which is demonstrably and materially injurious to Company and its Subsidiaries taken as a whole, (C) Employee's having been convicted of, or entered a plea of nolo contendere to burglary, larceny, murder or arson or a crime involving deceit, fraud, perjury or embezzlement, or (D) failure to notify Company of any actual or apparent conflicts of interest relating to Employee's management of personal investments in accordance with Section 3 of this Agreement. Notwithstanding the foregoing, prior to any termination for Cause under clauses (A), (B) or (D) of the preceding sentence, (X) Company must provide Employee with reasonable notice detailing the failure or conduct which the Board believes to constitute Cause, (Y) Company must provide Employee a reasonable opportunity to cure such failure or conduct, and (Z) after such notice and an opportunity to cure, a majority of the Board must reasonably determine that Employee has not cured such failure or conduct. Notwithstanding the foregoing provisions, Employee shall not be deemed to have been terminated for Cause unless and until Employee shall have been provided an opportunity to be heard in person by the Board (with the assistance of Employee's counsel if Employee so desires). (d) Disability. If Employee shall have been absent from the full-time performance of Employee's duties with Company for six consecutive months as a result of Employee's incapacity due to physical or mental illness as determined by Employee's 5 physician ("Disability"), Employee's employment may be terminated by Company for Disability. If Employee's employment is terminated for Disability, Employee shall be entitled to the compensation and benefits provided in Section 6(c)(i) hereof. If Employee fails during any period during the Term to perform Employee's full-time duties with Company as a result of incapacity due to physical or mental illness, as determined by Employee's physician, Employee shall continue to receive his benefits under this Agreement during such period until this Agreement is terminated for Disability by Company. (e) Resignation for Good Reason. Employee shall be entitled to terminate his employment for Good Reason as defined herein. If Employee terminates his employment for Good Reason, Employee shall be entitled to the compensation and benefits provided in Section 6(c)(i) hereof. "Good Reason" shall mean (1) the material breach of any of Company's obligations under this Agreement without Employee's written consent or (2) the occurrence of any of the following circumstances, as the case may be, without Employee's written consent: (i) the assignment by the Board to Employee of any duties that materially adversely alter the nature or status of Employee's office, title, responsibilities, including reporting responsibilities, from those in effect immediately prior to such assignment; (ii) the failure by Company to continue in effect any compensation plan in which Employee participates that is material to Employee's total compensation unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by Company to continue Employee's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable to Employee, unless any such failure to continue in effect any compensation plan or participation relates to a discontinuance of such plans or participation on a management-wide or Company-wide basis; (iii) the taking of any action by Company which would directly or indirectly materially reduce or deprive Employee of any material pension, welfare or fringe benefit then enjoyed by Employee, unless such action relates to a discontinuance of benefits on a management-wide or Company-wide basis; (iv) the failure of Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 12 hereof; (v) the relocation of Company's principal executive offices outside the greater Houston, Texas metropolitan area, or Company's requiring Employee to relocate anywhere other than the location of Company's principal executive 6 offices, except for required travel on Company's business to an extent substantially consistent with Employee's obligations under this Agreement; or (vi) the Employee's termination of his employment with Company or any successor who has assumed this Agreement in accordance with Section 12 hereof within the 30-day period following the first anniversary of a Change in Control of Company. Employee's right to terminate employment pursuant to this subsection shall not be affected by Employee's incapacity due to physical or mental illness. In addition, Employee's continued employment following any event, act or omission, regardless of the length of such continued employment, shall not constitute Employee's consent to, or a waiver of Employee's rights with respect to, such event, act or omission constituting a Good Reason circumstance hereunder. (f) Notice of Termination. Any purported termination of Employee's employment by Company or by Employee shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall set forth in reasonable detail the reason for termination of Employee's employment, or in the case of resignation for Good Reason, said notice must specify in reasonable detail the basis for such resignation. No purported termination which is not effected pursuant to this Section 6(f) shall be effective. (g) Date of Termination, Etc. "Date of Termination" shall mean in the case of Employee's death, his date of death, and in all other cases, the date specified in the Notice of Termination. If no notice is given by Employee, termination shall be effective on the last date Employee reported for work with Company, and shall be deemed to be a voluntary termination without Good Reason. (h) Mitigation. Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Section 6 by seeking other employment or otherwise, nor, except as provided in clause (B) of Section 6(c)(1), shall the amount of any payment or benefit provided for in this Agreement be reduced by any compensation or benefit earned by Employee as a result of employment by another employer, self-employment earnings, by retirement benefits, by offset against any amount claimed to be owing by Employee to Company, or otherwise. (i) Full Tax Gross-Up of Parachute Payments. (i) In the event that any payment, award, benefit or distribution (or any acceleration of any payment, award, benefit or distribution) made or provided to or for the benefit of Employee in connection with this Agreement, or Employee's employment with Company or the termination thereof (the "Payments") are determined to be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such 7 excise tax, together with any such interest and penalties, are collectively referred to as the "Excise Tax"), then the Employee shall be entitled to receive an additional payment (a "Gross-Up Payment") from Company in an amount equal to the Excise Tax (excluding any income tax or employment tax imposed upon the Gross Up Payment). The determination of whether the Payments are subject to the Excise Tax and, if so, the amount of the Gross-Up Payment, shall be made by a nationally recognized United States public accounting firm that has not, during the two years preceding the date of its selection, acted in any way on behalf of Company or any of its affiliates; provided, however, that if the accounting firm has determined that Section 4999 does not apply, and the Internal Revenue Service claims that Section 4999 applies to the Payments (or any portion thereof), then paragraph (ii) below of this Section 6(i) shall be applicable. (ii) Employee shall notify Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Company of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten (10) business days after Employee is informed in writing of such claim and shall apprise Company of the nature of such claim and the date on which such claim is requested to be paid. Employee shall not pay such claim prior to the expiration of the thirty (30) day period following the date on which he gives such notice to Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Company notifies Employee in writing prior to the expiration of such period that it desires to contest such claim, Employee shall: (A) give Company any information reasonably requested by Company relating to such claim, (B) take such action in connection with contesting such claim as Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by Company, (C) cooperate with Company in good faith in order effectively to contest such claim, and (D) permit Company to participate in any proceedings relating to such claim; provided, however, that Company shall bear and pay directly all costs and expenses (including additional interest, penalties, accountant's and legal fees) incurred in connection with such contest and shall indemnify and hold Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this subsection, Company 8 shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Employee to pay the tax claimed and commence a proceeding to obtain a refund or contest the claim in any permissible manner, and Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Company shall determine; provided, however, that if Company directs Employee to pay such claim and seek a refund, Company shall advance the amount of such payment to Employee, on an interest-free basis, and shall indemnify and hold Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder, and Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (iii) If, after the receipt by Employee of an amount advanced by Company pursuant to the foregoing, Employee becomes entitled to receive any refund with respect to such claim, Employee shall (subject to Company's complying with the requirements of the foregoing) promptly pay to Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Employee of an amount advanced by Company pursuant to the previous subsection, a determination is made that Employee shall not be entitled to any refund with respect to such claim and Company does not notify Employee in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. (j) Change in Control. For purposes of this Agreement, a Change in Control shall mean an occurrence of the following during the Term: (i) The "acquisition" by any "Person" (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act")) of "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of any securities of Company which generally entitles the holder thereof to vote for the election of directors of Company (the "Voting Securities") which, when added to the Voting Securities then "Beneficially Owned" by such Person, would result in such Person either 9 "Beneficially Owning" fifty percent (50%) or more of the combined voting power of Company's then outstanding Voting Securities or having the ability to elect fifty percent (50%) or more of Company's directors; provided, however, that for purposes of this paragraph (i) of Section 6(j), a Person shall not be deemed to have made an acquisition of Voting Securities if such Person: (a) becomes the Beneficial Owner of more than the permitted percentage of Voting Securities solely as a result of open market acquisition of Voting Securities by Company which, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by such Person; (b) is Company or any corporation or other Person of which a majority of its voting power or its equity securities or equity interest is owned directly or indirectly by Company (a "Controlled Entity"); (c) acquires Voting Securities in connection with a "Non-Control Transaction" (as defined in paragraph (iii) of this Section 6(j)); or (d) becomes the Beneficial Owner of more than the permitted percentage of Voting Securities as a result of a transaction approved by a majority of the Incumbent Board (as defined in paragraph (ii) below); or (ii) The individuals who, as of the Effective Date, are members of the Board (the "Incumbent Board"), cease for any reason to constitute at least a majority of the Board; provided, however, that if either the election of any new director or the nomination for election of any new director by Company's stockholders was approved by a vote of at least a majority of the Incumbent Board, such new director shall be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the 1934 Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or (iii) The consummation of a merger, consolidation or reorganization involving Company (a "Business Combination"), unless (1) the stockholders of Company, immediately before the Business Combination, own, directly or indirectly immediately following the Business Combination, at least fifty percent (50%) of the combined voting power of the outstanding voting securities of the corporation resulting from the Business Combination (the "Surviving Corporation") in substantially the same proportion as their ownership of the Voting Securities immediately before the Business Combination, and (2) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for the Business Combination constitute at least a majority of the members of the Board of Directors of the Surviving Corporation, and (3) no Person (other than (x) Company or any Controlled Entity, (y) a trustee or other fiduciary holding securities under one or more employee 10 benefit plans or arrangements (or any trust forming a part thereof) maintained by Company, the Surviving Corporation or any Controlled Entity, or (z) any Person who, immediately prior to the Business Combination, had Beneficial Ownership of fifty percent (50%) or more of the then outstanding Voting Securities) has Beneficial Ownership of fifty percent (50%) or more of the combined voting power of the Surviving Corporation's then outstanding voting securities (a Business Combination described in clauses (1), (2) and (3) of this paragraph shall be referred to as a "Non-Control Transaction"); (iv) A complete liquidation or dissolution of Company; or (v) The sale or other disposition of all or substantially all of the assets of Company to any Person (other than a transfer to a Controlled Entity). Notwithstanding the foregoing, if Employee's employment is terminated and Employee reasonably demonstrates that such termination (x) was at the request of a third party who has indicated an intention or has taken steps reasonably calculated to effect a Change in Control and who effectuates a Change in Control or (y) otherwise occurred in connection with, or in anticipation of, a Change in Control which actually occurs, then for all purposes hereof, the date of a Change in Control with respect to Employee shall mean the date immediately prior to the date of such termination of employment. A Change in Control shall not be deemed to occur solely because fifty percent (50%) or more of the then outstanding Voting Securities is Beneficially Owned by (x) a trustee or other fiduciary holding securities under one or more employee benefit plans or arrangements (or any trust forming a part thereof) maintained by Company or any Controlled Entity or (y) any corporation which, immediately prior to its acquisition of such interest, is owned directly or indirectly by the stockholders of Company in substantially the same proportion as their ownership of stock in Company immediately prior to such acquisition. 7. Restrictive Covenants. (a) Employer Covenants. Company agrees that during the Term, Company shall disclose to Employee or provide Employee with access to trade secrets or confidential information of Company or its Subsidiaries; or place Employee in a position to develop business goodwill on behalf of Company or its Subsidiaries; or entrust Employee with business opportunities of Company or its Subsidiaries. (b) Confidential Information; Unauthorized Disclosure. During the period of his employment hereunder and for any period following the termination of employment, the Employee shall not, whether during the period of his employment hereunder or thereafter, without the written consent of the Board or a person authorized thereby, disclose to any person, other than an employee of Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by 11 the Employee of his duties as an executive of Company, any confidential information obtained by him while in the employ of Company with respect to Company's business, including but not limited to technology, know-how, processes, maps, geological and geophysical data, other proprietary information and any information whatsoever of a confidential nature, the disclosure of which he knows or should know will be damaging to Company; provided, however, that confidential information shall not include any information known generally to the public (other than as a result of unauthorized disclosure by the Employee) or any information which the Employee may be required to disclose by any applicable law, order, or judicial or administrative proceeding. (c) Non-Competition. As part of the consideration for the compensation and benefits to be paid to Employee hereunder; to protect the trade secrets and confidential information of Company or its Subsidiaries that have been and will in the future be disclosed or entrusted to Employee, the business good will of Company or its Subsidiaries that has been and will in the future be developed by Employee or the business opportunities that have been and will in the future be disclosed or entrusted to Employee by Company or its Subsidiaries, and as an additional incentive for Company to enter into this Agreement, Company and Employee agree to the following competition provisions: During the Term and for a period of one year thereafter, Employee shall not in North America, directly or indirectly engage in or become interested financially in as a principal, employee, partner, shareholder, agent, manager, owner, advisor, lender, guarantor of any person engaged in any business substantially identical to the Business (defined below); provided, however, that (a) Employee may invest in stock, bonds or other securities in any such business (without participating in such business) if: (i)(A) such stock, bonds or other securities are listed on any United States securities exchange or are publicly traded in an over the counter market and (B) its investment does not exceed, in the case of any capital stock of any one issuer, 5% of the issued and outstanding capital stock, or in the case of bonds or other securities, 5% of the aggregate principal amount thereof issued and outstanding, or (ii) such investment is completely passive and no control or influence over the management or policies of such business is exercised, or (b) any such business shall be deemed to exclude ownership by Employee or any affiliated entity of interests in PXP, Plains All American GP LLC, Plains AAP LP, Plains All American Pipeline, L.P., and any of their respective subsidiaries and any board positions with respect to such entities. The term "Business" shall mean the marketing, gathering, transporting, terminalling and storing of crude oil and natural gas. Notwithstanding the foregoing provisions of this Section 7(c), in the event of a termination of Employee's employment by Company without Cause or in the event of Employee's resignation for Good Reason, Employee shall have no further obligations under this Section 7(c). (d) Non-Solicitation. Employee undertakes toward Company and is obligated, during the Term and for a period of one year thereafter, not to solicit or hire, directly or 12 indirectly, in any manner whatsoever (except in response to a general solicitation), in the capacity of employee, consultant or in any other capacity whatsoever, one or more of the employees, directors or officers or other persons (hereinafter collectively referred to as "Employees") who at the time of solicitation or hire, or in the 90-day period prior thereto, are working full-time or part-time for Company or any of its Subsidiaries and not to endeavour, directly or indirectly, in any manner whatsoever, to encourage any of said Employees to leave his or her job with Company or any of its Subsidiaries and not to endeavour, directly or indirectly, and in any manner whatsoever, to incite or induce any client of Company or any of its Subsidiaries to terminate, in whole or in part, its business relations with Company or any of its Subsidiaries. (e) Enforcement. It is the desire and intent of the parties that the provisions of this Section 7 shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Section 7 shall be adjudicated to be invalid or unenforceable, such provision shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable. Such deletion shall apply only with respect to the operation of such provisions of this Section 7 in the particular jurisdiction in which such adjudication is made. In addition, if the scope of any restriction contained in this Section 7 is too broad to permit enforcement thereof to its fullest extent, then such restriction shall be enforced to the maximum extent permitted by law, and the Executive hereby consents and agrees that such scope may be judicially modified in any proceeding brought to enforce such restriction. (f) Remedies. In the event of a breach or threatened breach by the Executive of the provisions of this Section 7, Company shall be entitled to an injunction and such other equitable relief as may be necessary or desirable to enforce the restrictions contained herein. Nothing herein contained shall be construed as prohibiting Company from pursuing any other remedies available for such breach or threatened breach or any other breach of this Agreement. (g) The parties hereto understand and acknowledge that Employee will serve in various capacities (including, without limitation, stockholder, employee, executive officer and director) of PXP. Company acknowledges that no actions by Employee in any or all of his capacities with PXP shall be a violation of the provisions of this Section 7. 8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit Employee's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by Company or any of its affiliated companies and for which Employee may qualify, nor shall anything herein limit or otherwise adversely affect such rights as Employee may have under any stock option or other agreements with Company or any of its affiliated companies. 13 9. Assignability. The obligations of Employee hereunder are personal and may not be assigned or delegated by him or transferred in any manner whatsoever, nor are such obligations subject to involuntary alienation, assignment or transfer, except by will or the laws of descent and distribution. 10. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when personally delivered, sent by overnight courier or by facsimile with confirmation of receipt or on the third business day after being mailed by United States registered mail, return receipt requested, postage prepaid, addressed to Company at its principal office address and facsimile number, directed to the attention of the Board with a copy to the Secretary of Company, and to Employee at Employee's residence address and facsimile number on the records of Company or to such other address as either party may have furnished to the other in writing in accordance herewith except that notice of change of address shall be effective only upon receipt. 11. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 12. Successors; Binding Agreement. (a) Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and assets of Company ("Successor") or any corporation which becomes the ultimate parent corporation of Company or any such Successor ("Ultimate Parent") to expressly assume and agree in writing satisfactory to the Employee to perform this Agreement in the same manner and to the same extent that Company would be required to perform it if no such succession had taken place; provided, however, that express assumption shall not be required where this agreement is assumed by operation of law. As used in this Agreement, including, without limitation, in Section 3, the term "Company" shall include any Successor and Ultimate Parent which executes and delivers the Agreement as provided for in this Section 12 or which otherwise becomes bound by all terms and provisions of this Agreement by operation of law. (b) After the death or Disability of Employee, this Agreement and all rights of Employee hereunder shall inure to the benefit of and be enforceable by Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 13. Indemnification. During the Term and for a period of six years thereafter, Company shall cause Employee to be covered by and named as an insured under any policy or contract of insurance obtained by it to insure its directors and officers against personal liability for acts or omissions in connection with service as an officer or director of Company or service in other capacities at the request of Company. The coverage provided to Employee pursuant to 14 this Section 13 shall be of a scope and on terms and conditions at least as favorable as the most favorable coverage provided to any other officer or director of Company (or any successor). In addition, to the maximum extent permitted by the by-laws of Company in effect from time to time and applicable law, during the Term and for a period of six years thereafter, Company shall indemnify Employee against and hold Employee harmless from any costs, liabilities, losses and exposures for Employee's services as an employee, officer and director of Company (or any successor). 14. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Employee and such officer as may be specifically authorized by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or in compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement is an integration of the parties' agreement; no agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. Employee represents and warrants that the execution of this Agreement will not result in any breach of any prior or existing agreement executed by Employee with respect to any third party. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Texas. 15. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 16. Entire Agreement. This Agreement contains the entire understanding of the parties in respect of the subject matter and supersedes and replaces in full all prior written or oral agreements and understandings between the parties with respect to such subject matters including but not limited to the Original Agreement. - SIGNATURE PAGE FOLLOWS - 15 IN WITNESS WHEREOF, the parties have executed this Agreement as of September ___, 2002 effective for all purposes as provided above on the Effective Date. PLAINS RESOURCES INC. By: /s/ James C. Flores -------------------------------------------- James C. Flores Chairman and Chief Executive Officer EMPLOYEE /s/ John T. Raymond -------------------------------------------- John T. Raymond 16